Constancia Technical Report Ni 43 101

Norsemont Mining Inc.

CONSTANCIA COPPER PROJECT

Definitive Feasibility Study Technical Report NI 43-101

Revision 0

28 September 2009

Constancia Copper Project Definitive Feasibility Study

NI 43-101 Technical Report Rev0

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Important notice

This Constancia Copper Project Technical Report (Technical Report or Report) has been prepared for Norsemont Mining Inc. (Norsemont) by GRD Minproc Limited (GRD Minproc). The Technical Report is intended to be used by Norsemont subject to the terms and conditions of its definitive feasibility study contract with GRD Minproc. That contract permits Norsemont to file this report as a Technical Report with Canadian Securities Regulatory Authorities pursuant to provincial securities legislation. Except for the purposes legislated under provincial securities laws, any other use of this Report by any third part is at that partys sole risk. The Technical Report should be read in the context of the methodology, procedures and techniques used and GRD Minproc's assumptions, and the circumstances and constraints under which the Technical Report was prepared. The Technical Report is to be read as a whole, and sections or parts of it should not be read or relied upon out of context. GRD Minproc has, in preparing the Technical Report, followed methodology and procedures, and exercised due care consistent with the intended level of accuracy of the study on which it is based, using its professional judgment and reasonable care. However, no warranty is given regarding the accuracy of estimates and other assumed values. It should also be borne in mind that all figures contained in the Technical Report are valid only as at the date of the Technical Report and may vary thereafter. GRD Minproc does not take responsibility for or adopt as its own sections of the Report prepared by or for information supplied by third persons or Qualified Persons not employed or engaged by GRD Minproc. This notice, which is an integral part of the Report, must accompany every copy of the Report.



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Title Page Project Name: Constancia Copper Project Title: Definitive Feasibility Study Technical Report Location: Province of Chumbivilcas, Department of Cusco, Peru Effective Dates: Effective Date of Technical Report: 28 September 2009 Effective Date of Mineral Reserves: 28 September 2009 Effective Date of Mineral Resources: 28 September 2009 Qualified Persons:

David D. (Dan) Greig, B.Sc, M.A.I.G. (1684-1722), employed by GRD Minproc Limited as Principal Geologist, was responsible for overall preparation of the report.

Lynn Widenbar, B.Sc. (Geology), M.Sc., MAusIMM, employed by GRD Minproc Limited as a Geological Consultant, was responsible for data quality verification (Section 14) and for resource modelling and reporting (Section 17).

Ross Oliver, B.Eng (Mining), Aus.I.M.M. 105137, employed by GRD Minproc Limited as Manager Mining & Geology, was responsible for the preparation of Section 17.14 on Mineral Reserves and Section 18.1 covering Mining.

Greg Harbort, B.Eng (Met), University of Qld, 1985; Ph.D. University of Qld, 2005; MAusIMM Principal Process engineer for GRD Minproc Limited, was responsible for Mineral Processing and Metallurgical Testwork (Section 16), and for Plant Operating Costs and site infrastructure operating costs (Section18.14).

Craig Cuttriss, B.Sc, M.Eng, R.P.E.Q., MAusIMM, Principal Process Engineer and Study Manager for GRD Minproc Limited,was responsible for GRD Minprocs engineering aspects of the Project as contained in Section 18.4, Section 18.9, Section 18.11, Section 18.13 and Section 18.17.

Thomas F. Kerr, M.Sc., President of Knight Pisold and Co. USA, Registered Professional Engineer (Civil and Geotechnical), P.Eng., in British Columbia (#14906) and Ontario (#90407230) and P.E. in California (#C49260) and Alaska (#10969), was responsible for information relating to the site geotechnical investigations, and design and costing of the Tailings Storage Facility and water management systems as described in Section 18.2 (excluding Section 18.2.2), Section 18.6, Section 18.7 and Section 18.13.5.

Robert Cummings, M.Sc. Geol. Eng., Registered Professional Engineer in Arizona, Geotechnical Consultant and Principal of Saguaro Geoservices, was responsible for development of pit slope stability analyses and design parameters in Section 18.1.3 and Section 18.2.2.

Other Expert contributors:

Carol Fries, Vice President of Health, Safety, Environment and Community Relations for Norsemont Mining Inc., responsible for the preparation of the Environmental Social Impact Assessment and the preparation of information provided in Sections 5 and 18.



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Gaston Loyola, MAusIMM, Vice President Exploration for Norsemont Mining Inc. is responsible for Norsemonts exploration, drilling, sampling and data quality activities as described in Sections 7 to 13, and for Norsemonts geological modelling (Section 17).

Christopher Gilmour, B.Eng (Civil), R.P.E.Q. (7126), M.I.E.Aust, CP.Eng, Operational Manager for GRD Minproc Limited, Brisbane, was responsible for the preparation of the capital costs estimate as detailed in Section 18.13.

Alan Ekstrom, Dip.E.Eng, R.P.E.Q. (9013), M.I.E. Aust. Leading Electrical and Instrumentation Engineer for GRD Minproc Limited, responsible for electrical, instrumentation and controls engineering as described in Section 18.4.3 and Section 18.4.4.

Ross Oliver, B.Eng (Mining), Aus.I.M.M. 105137, employed by GRD Minproc Limited as Manager Mining and Geology, responsible for preparation of the pre-tax financial model (part of Section 18.16).

Jorge Picon financial consultant to Norsemont is responsible for preparation of the post-tax financial model (part of Section 18.16).

David Evans, M.App.Sc. University of New South Wales, Australia, Principal Hydrogeologist for MWH Peru, was responsible for hydrogeological components of the environmental impact assessment and feasibility study.

Jean Cho, Ph.D. Princeton. P.Eng. British Columbia, Canada (Registration number 24635), was responsible for the numerical hydrogeological modeling and impact analysis.

Luis Yafac, B.Sc. Eng., Univ. National de Ingeniera (Mining), Project Manager of SIGT S.A., a Columbian consulting company which provides services in design and supervision of roads and highways, supervised the design and costing for the access road to the project (Section 18.5.1).

Mario Rojas Garay, B.Sc. Eng Universidad Nacional de Ingeniera, Engineer in Projects and Power Generation and Transmission for Cesel Ingenieros S.A., undertook design and costing for the Constancia project sub-stations in Section 18.5.4.

Pablo Lozano Ramon Chavez, B.Sc. Eng Universidad Nacional de Ingeniera, electrical engineer and Head of studies for Cesel Ingenieros S.A., was responsible for the design and costing of the HT power line in Section 18.5.4.



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Table of Contents Important notice ............................................................................................................ i

1. SUMMARY............................................................................................................. 19 1.1 INTRODUCTION...............................................................................................................................19 1.2 GEOLOGY AND MINERAL RESOURCES.......................................................................................21

1.2.1 Geological setting, mineralisation and alteration...............................................................21 1.2.2 Exploration.........................................................................................................................22 1.2.3 Mineral resource estimation ..............................................................................................23 1.2.4 Mineral resources ..............................................................................................................24

1.3 MINING .............................................................................................................................................25 1.3.1 Introduction ........................................................................................................................25 1.3.2 Pit optimisation and pit design...........................................................................................25 1.3.3 Mineral reserve ..................................................................................................................26 1.3.4 Mine and process schedules .............................................................................................27 1.3.5 Mine fleet assessment .......................................................................................................27 1.3.6 Mine capital costs ..............................................................................................................28 1.3.7 Mine operating cost ...........................................................................................................31

1.4 GEOTECHNICAL INVESTIGATIONS ..............................................................................................31 1.4.1 Site investigations..............................................................................................................31 1.4.2 Pit geotechnical design......................................................................................................32 1.4.3 Subsurface conditions .......................................................................................................35 1.4.4 Construction materials .......................................................................................................35 1.4.5 Seismic conditions .............................................................................................................35

1.5 METALLURGICAL TESTWORK.......................................................................................................36 1.5.1 Testwork sample selection ................................................................................................36 1.5.2 Comminution testwork .......................................................................................................36 1.5.3 Flotation testwork...............................................................................................................37

1.6 PROCESS DESCRIPTION AND PLANT DESIGN...........................................................................38 1.6.1 Throughput ........................................................................................................................40 1.6.2 Crushing ............................................................................................................................41 1.6.3 Grinding .............................................................................................................................41 1.6.4 Copper flotation .................................................................................................................42 1.6.5 Molybdenum flotation.........................................................................................................42 1.6.6 Copper thickening and filtration .........................................................................................42 1.6.7 Molybdenum thickening and filtration ................................................................................42 1.6.8 Tailing thickening ...............................................................................................................43 1.6.9 Tailing water reclaim..........................................................................................................43 1.6.10 Concentrate storage and loadout ......................................................................................43 1.6.11 Water services ...................................................................................................................43 1.6.12 Reagents ...........................................................................................................................43 1.6.13 On stream analysis and laboratory....................................................................................43

1.7 WASTE MANAGEMENT...................................................................................................................44 1.7.1 Waste rock facility (WRF) ..................................................................................................44 1.7.2 Tailings management facility (TMF) ..................................................................................45



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1.7.3 Topsoil and unsuitable material stockpiles........................................................................46 1.8 INFRASTRUCTURE .........................................................................................................................46

1.8.1 Access roads .....................................................................................................................46 1.8.2 Water supply......................................................................................................................47 1.8.3 Power supply .....................................................................................................................48 1.8.4 Internal roads.....................................................................................................................50 1.8.5 Buildings ............................................................................................................................50 1.8.6 Construction and accommodation camp ...........................................................................51 1.8.7 Concentrate transport and shipping ..................................................................................51

1.9 WATER MANAGEMENT ..................................................................................................................51 1.9.1 Process water ....................................................................................................................52 1.9.2 Water balance....................................................................................................................53 1.9.3 Non-process water.............................................................................................................53

1.10 ENVIRONMENTAL AND SOCIAL CONSIDERATIONS...................................................................54 1.10.1 ESIA...................................................................................................................................54 1.10.2 Stakeholder mapping.........................................................................................................55 1.10.3 Status of land ownership in the communities of Uchucarco and Chilloroya......................56 1.10.4 Impact identification and evaluation ..................................................................................56 1.10.5 Environmental management plan......................................................................................56 1.10.6 Resettlement Action Plan (RAP) .......................................................................................57 1.10.7 Community relations plan ..................................................................................................57 1.10.8 Health, safety and environment (HSE) management and monitoring plan .......................58 1.10.9 Closure plan.......................................................................................................................59

1.11 PROJECT IMPLEMENTATION PLAN..............................................................................................60 1.11.1 Approach and strategy.......................................................................................................60 1.11.2 Quality assurance ..............................................................................................................61 1.11.3 Project implementation schedule.......................................................................................61 1.11.4 Civil construction fleet........................................................................................................63

1.12 PROJECT OPERATIONAL PLAN ....................................................................................................64 1.13 CAPITAL COST ESTIMATE .............................................................................................................65

1.13.1 Initial project capital ...........................................................................................................65 1.13.2 Sustaining capital...............................................................................................................66

1.14 OPERATING COST ESTIMATES ....................................................................................................66 1.14.1 Mine operating cost ...........................................................................................................67 1.14.2 Plant and infrastructure costs ............................................................................................67 1.14.3 General and administration ...............................................................................................68 1.14.4 Off-site charges .................................................................................................................68 1.14.5 Royalties ............................................................................................................................69

1.15 MARKETING, PRODUCT PRICING AND TREATMENT CHARGES ..............................................69 1.16 PROJECT FINANCIAL ANALYSIS...................................................................................................70

1.16.1 Background........................................................................................................................70 1.16.2 Summary ...........................................................................................................................73 1.16.3 Pre-tax analysis .................................................................................................................73 1.16.4 Post-tax analysis................................................................................................................74

1.17 CONCLUSIONS................................................................................................................................77 1.17.1 Project overview ................................................................................................................77



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1.17.2 Risks and opportunities .....................................................................................................77 1.18 RECOMMENDATIONS.....................................................................................................................79

1.18.1 Mineral resources ..............................................................................................................79 1.18.2 Mining and mineral reserves .............................................................................................79 1.18.3 Geotechnical and hydrogeological studies........................................................................79 1.18.4 Process testwork and plant design....................................................................................80 1.18.5 Environmental and permitting............................................................................................80

2. INTRODUCTION.................................................................................................... 81 2.1 BACKGROUND ................................................................................................................................81 2.2 SCOPE OF WORK ...........................................................................................................................81 2.3 SOURCES OF INFORMATION ........................................................................................................82 2.4 SITE INSPECTIONS.........................................................................................................................82 2.5 CONTRIBUTORS TO THE REPORT...............................................................................................83 2.6 DISCLOSURE OF INTEREST..........................................................................................................85

3. RELIANCE ON OTHER EXPERTS.......................................................................... 86

4. PROPERTY DESCRIPTION AND LOCATION ......................................................... 87 4.1 GENERAL LOCATION......................................................................................................................87 4.2 PERUVIAN MINING LAW.................................................................................................................87 4.3 CONSTANCIA MINING CONCESSIONS.........................................................................................88 4.4 MINERAL RIGHTS OWNERSHIP ....................................................................................................91

4.4.1 Rio Tinto purchase.............................................................................................................91 4.4.2 Mitsui Mining and smelting purchase ................................................................................93

4.5 SURFACE RIGHTS ..........................................................................................................................93 4.6 ENVIRONMENTAL REGULATIONS ................................................................................................95

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY................................................................................................... 97

5.1 ACCESSIBILITY ...............................................................................................................................97 5.2 CLIMATE AND VEGETATION..........................................................................................................97 5.3 LOCAL RESOURCES AND INFRASTRUCTURE............................................................................98 5.4 GEOMORPHOLOGY........................................................................................................................99

6. HISTORY............................................................................................................. 100

7. GEOLOGICAL SETTING ...................................................................................... 101 7.1 DISTRICT GEOLOGY.....................................................................................................................101 7.2 PROPERTY GEOLOGY .................................................................................................................102

7.2.1 Stratigraphy .....................................................................................................................103 7.2.2 Intrusions .........................................................................................................................104 7.2.3 Alteration..........................................................................................................................105 7.2.4 Structural geology............................................................................................................106

8. DEPOSIT TYPES ................................................................................................. 108



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9. MINERALISATION AND ALTERATION ................................................................ 109 9.1 CONSTANCIA.................................................................................................................................109 9.2 SAN JOS ......................................................................................................................................110

10. EXPLORATION.................................................................................................... 111 10.1 SURFACE MAPPING AND SAMPLING.........................................................................................111 10.2 GEOPHYSICS ................................................................................................................................111 10.3 EXPLORATORY DRILLING ...........................................................................................................117

11. DRILLING............................................................................................................ 119 11.1.1 Collar location ..................................................................................................................120 11.1.2 Rig setup..........................................................................................................................121 11.1.3 Downhole survey .............................................................................................................121

12. SAMPLING METHODS AND APPROACH ............................................................. 122 12.1 DRILLHOLE SAMPLING METHODS NORSEMONT 2007-2008...................................................122

12.1.1 Sample collection.............................................................................................................122 12.1.2 Drillhole logging ...............................................................................................................123 12.1.3 Density measurements....................................................................................................123 12.1.4 Sample preparation, analysis and security......................................................................123

12.2 CORE SAMPLING ..........................................................................................................................124 12.3 QAQC PROCEDURES ...................................................................................................................124

12.3.1 Field duplicates................................................................................................................124 12.3.2 Blanks ..............................................................................................................................124 12.3.3 Standards ........................................................................................................................125 12.3.4 Other QAQC samples......................................................................................................125 12.3.5 Referee laboratory ...........................................................................................................126

12.4 STATEMENT ON SAMPLE PREPARATION AND ANALYSIS......................................................126

13. SAMPLE PREPARATION, ANALYSES AND SECURITY ....................................... 127

14. DATA VERIFICATION.......................................................................................... 128 14.1 NORSEMONT INTERNAL DATA VERIFICATION.........................................................................128

14.1.1 Collar location ..................................................................................................................128 14.1.2 Downhole survey .............................................................................................................128 14.1.3 QAQC data verification....................................................................................................128 14.1.4 Database generation and validation ................................................................................128

14.2 GRD MINPROC DATA VERIFICATION .........................................................................................129 14.2.1 Drilling..............................................................................................................................129 14.2.2 Sampling..........................................................................................................................129 14.2.3 QAQC data verification....................................................................................................129 14.2.4 Collar location ..................................................................................................................138 14.2.5 Downhole survey .............................................................................................................138 14.2.6 Sample database integrity ...............................................................................................139 14.2.7 Independent samples ......................................................................................................139 14.2.8 Core recovery considerations..........................................................................................139



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15. ADJACENT PROPERTIES.................................................................................... 141

16. MINERAL PROCESSING AND METALLURGICAL TESTING ................................ 142 16.1 PRE-DFS TEST WORK..................................................................................................................142

16.1.1 Iditec-Chile.......................................................................................................................142 16.1.2 Plenge Laboratories.........................................................................................................142 16.1.3 SGS Chile test work.........................................................................................................145 16.1.4 SGS Canada flotation variability tests .............................................................................146

16.2 DFS METALLURGICAL TESTWORK ............................................................................................148 16.2.1 Mineralogy .......................................................................................................................149 16.2.2 Comminution....................................................................................................................150 16.2.3 Flotation ...........................................................................................................................152

16.3 PROCESS DESIGN CRITERIA......................................................................................................164 16.3.1 Grinding ...........................................................................................................................164 16.3.2 Copper flotation ...............................................................................................................165 16.3.3 Molybdenum flotation.......................................................................................................166 16.3.4 Copper thickening and filtration .......................................................................................168 16.3.5 Molybdenum thickening and filtration ..............................................................................168 16.3.6 Tailings thickening ...........................................................................................................168 16.3.7 Concentrate storage ........................................................................................................169 16.3.8 Water services .................................................................................................................169 16.3.9 Reagents .........................................................................................................................170

16.4 PROCESS PLANT DESCRIPTION ................................................................................................170 16.4.1 Overview..........................................................................................................................170

17. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES ............................ 172 17.1 INTRODUCTION.............................................................................................................................172 17.2 DATA PROVIDED TO GRD MINPROC..........................................................................................172 17.3 DATA PREPARATION....................................................................................................................173 17.4 SURFACE AND SOLID WIREFRAME DATA GENERATION........................................................174

17.4.1 Lithology model................................................................................................................174 17.4.2 Mineralisation domain model...........................................................................................180 17.4.3 Copper grade shell model................................................................................................184 17.4.4 Zinc grade shell model.....................................................................................................186 17.4.5 Skarn ore type domain.....................................................................................................188 17.4.6 Topography......................................................................................................................196

17.5 SAMPLE CODING ..........................................................................................................................198 17.5.1 Flagging by lithology domain ...........................................................................................198 17.5.2 Flagging by mineralisation domain ..................................................................................198 17.5.3 Flagging by copper and zinc grade shells .......................................................................198

17.6 DATA COMPOSITING....................................................................................................................198 17.7 STATISTICAL ANALYSIS AND VARIOGRAPHY ..........................................................................200

17.7.1 Statistical analysis by domain..........................................................................................200 17.7.2 Outlier analysis (capping) ................................................................................................200 17.7.3 Variography .....................................................................................................................207

17.8 BLOCK MODEL CONSTRUCTION ................................................................................................210



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17.8.1 Preparation ......................................................................................................................210 17.8.2 Lithological modelling (LITH) ...........................................................................................211 17.8.3 Mineralisation modelling (ZONE).....................................................................................212 17.8.4 Cu grade shell modelling (02CU) ....................................................................................214 17.8.5 Zn grade shell modelling (ZNZONE) ...............................................................................214 17.8.6 Sub-model consolidation .................................................................................................214

17.9 GRADE ESTIMATION ....................................................................................................................214 17.9.1 Domain control on estimation ..........................................................................................215 17.9.2 Search strategy................................................................................................................215 17.9.3 Unfolding..........................................................................................................................216 17.9.4 High grade capping..........................................................................................................217 17.9.5 Other parameters.............................................................................................................217

17.10 DENSITY ASSIGNMENT................................................................................................................217 17.11 RESOURCE CLASSIFICATION .....................................................................................................218 17.12 MODEL VALIDATION.....................................................................................................................222 17.13 MINERAL RESOURCE REPORTING ............................................................................................228 17.14 MINERAL RESERVES....................................................................................................................236

18. OTHER RELEVANT DATA AND INFORMATION .................................................. 237 18.1 MINING STUDIES...........................................................................................................................237

18.1.1 Introduction ......................................................................................................................237 18.1.2 Pit optimisation ................................................................................................................238 18.1.3 Pit design .........................................................................................................................243 18.1.4 Mineral Reserve...............................................................................................................251 18.1.5 Mine and process schedules ...........................................................................................253 18.1.6 Ore types and batching....................................................................................................258 18.1.7 Mine fleet assessment .....................................................................................................259 18.1.8 Mine operating cost .........................................................................................................262 18.1.9 Mine capital cost ..............................................................................................................265

18.2 GEOTECHNICAL STUDIES ...........................................................................................................268 18.2.1 Introduction ......................................................................................................................268 18.2.2 Open pit geotechnical investigations, design parameters and slope angles...................273 18.2.3 Geotechnical investigations at the TMF, PAG WRF and plant site.................................281 18.2.4 Borrow materials..............................................................................................................283 18.2.5 Natural hazards and slope stability..................................................................................283 18.2.6 Seismic risk analysis........................................................................................................284

18.3 HYDROGEOLOGICAL STUDIES...................................................................................................285 18.3.1 Introduction ......................................................................................................................285 18.3.2 Hydrogeological investigations and results .....................................................................286 18.3.3 Numerical seepage modelling and affects analysis ........................................................288 18.3.4 Open pit seepage and dewatering...................................................................................289 18.3.5 Tailings management facility seepage ............................................................................290 18.3.6 Waste rock facility seepage.............................................................................................290

18.4 PROCESS PLANT DESIGN ...........................................................................................................291 18.4.1 General layout and description........................................................................................291 18.4.2 Facility description ...........................................................................................................292



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18.4.3 Electrical ..........................................................................................................................303 18.4.4 Instrumentation and control .............................................................................................309 18.4.5 Buildings ..........................................................................................................................310

18.5 INFRASTRUCTURE .......................................................................................................................314 18.5.1 Access road .....................................................................................................................314 18.5.2 Water supply....................................................................................................................320 18.5.3 Accommodation camp .....................................................................................................321 18.5.4 Power supply ...................................................................................................................322

18.6 WATER MANAGEMENT ................................................................................................................326 18.6.1 Introduction ......................................................................................................................326 18.6.2 Process water ..................................................................................................................328 18.6.3 Water balance..................................................................................................................329 18.6.4 Non-process water...........................................................................................................331

18.7 WASTE MANAGEMENT.................................................................................................................332 18.7.1 Waste rock facility............................................................................................................332 18.7.2 Tailings management facility ...........................................................................................334 18.7.3 Topsoil and unsuitable material stockpiles......................................................................339

18.8 PORT AND TRANSPORT ..............................................................................................................339 18.8.1 Introduction ......................................................................................................................339 18.8.2 Management of concentrates ..........................................................................................340 18.8.3 Transportation..................................................................................................................340 18.8.4 Port management ............................................................................................................340

18.9 PROJECT IMPLEMENTATION PLAN............................................................................................341 18.9.1 Approach and strategy.....................................................................................................341 18.9.2 Quality assurance ............................................................................................................343 18.9.3 Project construction fleet .................................................................................................344 18.9.4 Project implementation schedule.....................................................................................346 18.9.5 Permits and licences........................................................................................................348

18.10 PROJECT OCCUPATIONAL HEALTH, SAFETY, ENVIRONMENT AND SECURITY..................349 18.10.1 Occupational health and safety .......................................................................................349 18.10.2 Security ............................................................................................................................349

18.11 PROJECT OPERATIONAL PLAN ..................................................................................................350 18.12 ENVIRONMENTAL CONSIDERATIONS........................................................................................351

18.12.1 Legal framework ..............................................................................................................351 18.12.2 Environmental impact assessment..................................................................................352 18.12.3 HSE management and monitoring plan...........................................................................363 18.12.4 Closure plan.....................................................................................................................364

18.13 CAPITAL COST ..............................................................................................................................367 18.13.1 Summary .........................................................................................................................367 18.13.2 Mining capital cost estimate ............................................................................................369 18.13.3 Process plant and associated infrastructure capital cost estimate..................................369 18.13.4 Indirect cost estimate (EPCM).........................................................................................370 18.13.5 Waste management facilities and water infrastructure capital cost estimate..................372 18.13.6 Infrastructure capital cost estimate..................................................................................372 18.13.7 Owners civil construction costs .......................................................................................374 18.13.8 Owners cost estimate ......................................................................................................375



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18.13.9 Contingency.....................................................................................................................375 18.14 OPERATING COSTS......................................................................................................................376

18.14.1 Summary .........................................................................................................................376 18.14.2 Mining - operating cost estimate......................................................................................377 18.14.3 Process plant and associated infrastructure - operating cost estimate...........................378 18.14.4 General and administration - operating cost estimate.....................................................381 18.14.5 Off-site operating cost estimate.......................................................................................384 18.14.6 Royalty cost estimate....................................................................................................384

18.15 MARKETING, TREATMENT CHARGES AND PRODUCT PRICING ............................................385 18.16 PROJECT FINANCIAL ANALYSIS.................................................................................................388

18.16.1 Summary .........................................................................................................................388 18.16.2 Key project assumptions..................................................................................................388 18.16.3 Pre-tax analysis ...............................................................................................................392 18.16.4 Post-tax Analysis .............................................................................................................398

18.17 RISK ASSESSMENT ......................................................................................................................402

19. INTERPRETATION AND CONCLUSIONS............................................................. 406

20. RECOMMENDATIONS FOR FURTHER WORK ..................................................... 409 20.1 RESOURCES .................................................................................................................................409 20.2 MINING ...........................................................................................................................................409 20.3 GEOTECHNICAL AND HYDROGEOLOGICAL STUDIES.............................................................409 20.4 METALLURGICAL TESTWORK.....................................................................................................410 20.5 INFRASTRUCTURE .......................................................................................................................411 20.6 ESIA AND PERMITTING ................................................................................................................411 20.7 PROJECT IMPLEMENTATION ......................................................................................................411

21. REFERENCES...................................................................................................... 412

22. DATE AND SIGNATURE PAGE............................................................................ 413

23. ADDITONAL REQUIREMENTS FOR TECHNICAL REPORTS ON PRODUCTION AND DEVELOPMENT PROPERTIES .................................................................... 415

24. ILLUSTRATIONS................................................................................................. 416

25. ANNEXURES....................................................................................................... 417

List of Attachments Appendix 1 Permits Appendix 2 Picon & Asociados Tax Opinion



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List of Tables Table 1.1 Constancia Project Global Mineral Resource Estimate (0.25% Cu Cut-off)...........................24 Table 1.2 Constancia Project Global Mineral Resource Estimate (0.20% Cu Cut-off)...........................24 Table 1.3 Constancia Project Global Mineral Resource Estimate (0.15% Cu Cut-off)...........................25 Table 1.4 Constancia Project Mineral Reserves....................................................................................26 Table 1.5 Equipment Fleet, Capital and Hourly Operating Costs ..........................................................28 Table 1.6 Mine Capital Costs by Component ........................................................................................29 Table 1.7 Mine Capital, Sustaining and Replacement Costs ($ M)........................................................30 Table 1.8 Expected Elemental Recoveries ............................................................................................38 Table 1.9 Theoretical Maximum Throughput For Each Ore Type..........................................................40 Table 1.10 Plant Design Throughput Rate ............................................................................................41 Table 1.11 Civil Construction Fleet........................................................................................................64 Table 1.12 Constancia Project Capital Cost Estimate ...........................................................................65 Table 1.13 Summary Operating Cost Estimate .....................................................................................66 Table 1.14 Mine Operating Costs ..........................................................................................................67 Table 1.15 Plant and Associated Infrastructure Operating Cost Estimate .............................................68 Table 1.16 G&A Operating Cost Estimate .............................................................................................68 Table 1.17 Off-site Operating Costs ......................................................................................................69 Table 1.18 Royalty Costs.......................................................................................................................69 Table 1.19 Operating Cost Inputs to Financial Model............................................................................70 Table 1.20 Metal Price Assumptions in Cashflow Model .......................................................................71 Table 1.21 Production Schedule for Cashflow Model ............................................................................72 Table 1.22 Constancia Project After Tax Analysis Summary.................................................................73 Table 1.23 Tax and Depreciation Rates ................................................................................................75 Table 1.24 Post-tax Project Sensitivity Analysis ....................................................................................76 Table 2.1 Contributors to Constancia DFS Technical Report ................................................................84 Table 4.1 Constancia Concessions .......................................................................................................90 Table 4.2 Constancia Concession Grants .............................................................................................91 Table 4.3 Option Exercise Schedule .....................................................................................................92 Table 4.4 Private Lands Summary ........................................................................................................93 Table 5.1 Travel Distance and Time to Constancia ...............................................................................97 Table 11.1 Drilling Programmes by Year (in metres drilled) ................................................................119 Table 11.2 Drilling Programmes (to 6 June 2009) ...............................................................................120 Table 12.1 Recommended Values for Standards ................................................................................125 Table 16.1 Iditec-Chile Flotation Recoveries .......................................................................................142 Table 16.2 Plenge Laboratories Phase 1 Locked Cycle Test Results Hypogene Ore ......................143 Table 16.3 Plenge Laboratories Phase 1 Supergene Locked Cycle Test Results...............................143 Table 16.4 Plenge Laboratories Phase 1 Locked Cycle Test Results Skarn Ore .............................143 Table 16.5 Plenge Laboratories Phase 2 Locked Cycle Test Results (July 4, 2008)...........................144 Table 16.6 Plenge Laboratories Phase 2 Selected Locked Cycle Test Results ..................................145 Table 16.7 Historical SGS Chile Comminution Test Work...................................................................145 Table 16.8 SGS Canada Rougher Flotation Variability Testing Conditions .........................................146 Table 16.9 SGS Canada Rougher Flotation Variability Testing Results Supergene Ore..................146 Table 16.10 SGS Canada Rougher Flotation Variability Testing Results Hypogene Ore.................147 Table 16.11 SGS Canada Rougher Flotation Variability Testing Results Skarn Ore........................147



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Table 16.12 Ore Zone Samples...........................................................................................................148 Table 16.13 Collectors Evaluated in Supergene Rougher Flotation ....................................................152 Table 16.14 Conditions for Supergene Locked Cycle Tests................................................................153 Table 16.15 Results from Variability Testing on Supergene Ore Samples ..........................................154 Table 16.16 Test Conditions for the Hypogene Locked Cycle Test Work............................................155 Table 16.17 Results From Hypogene Locked Cycle Tests..................................................................155 Table 16.18 Results from Variability Testing on Hypogene Ore Samples ...........................................156 Table 16.19 Deep Hypogene Samples Tested at 75 m and 106 m .................................................156 Table 16.20 Conditions Used in Locked Cycle Test Work on Medium-Zinc Skarn Ore .......................157 Table 16.21 Results from Medium-Zinc Locked Cycle Tests...............................................................158 Table 16.22 Simulated Molybdenum Grade/Recovery as a Function of Cleaning Stages...................159 Table 16.23 Anticipated Molybdenum Concentrate .............................................................................160 Table 16.24 Final Molybdenum Product Elemental Composition ........................................................161 Table 16.25 Pressure Filtration Results...............................................................................................164 Table 16.26 Summary of Design Ore Parameters Grinding .............................................................165 Table 16.27 Summary of Copper Flotation Design Criteria .................................................................165 Table 16.28 Molybdenum Flotation Recovery and Concentrate Grade ...............................................166 Table 16.29 Summary of Molybdenum Flotation Design Criteria.........................................................167 Table 16.30 Copper Concentrate Thickening and Filtration Specification ...........................................168 Table 16.31 Molybdenum Concentrate Thickening and Filtration Specification...................................168 Table 16.32 Tailings Thickening Specification.....................................................................................169 Table 16.33 Concentrate Storage Specification ..................................................................................169 Table 16.34 Water Services Specification ...........................................................................................169 Table 16.35 Reagent Specification Summary......................................................................................170 Table 17.1 Quantities of SK2 Skarn in Model ......................................................................................195 Table 17.2 Variogram Model Parameters............................................................................................208 Table 17.3 Model Prototype Parameters .............................................................................................210 Table 17.4 Search Parameters............................................................................................................216 Table 17.5 Density Assignment ...........................................................................................................218 Table 17.6 Resource Classification Criteria.........................................................................................219 Table 17.7 Statistical Comparison between Means of Composite and Model Data Lithology

Model............................................................................................................................223 Table 17.8 Statistical Comparison between Means of Composite and Model Data Lithology

Model............................................................................................................................224 Table 17.9 Statistical Comparison between Means of Composite and Model Data Mineral

Zonation Model.............................................................................................................224 Table 17.10 Constancia Project Global Mineral Resource Estimate 0.25% Cu Cut-off .......................229 Table 17.11 Constancia Project Global Mineral Resource Estimate 0.20% Cu Cut-off .......................229 Table 17.12 Constancia Project Global Mineral Resource Estimate at Various Cu Cut-off .................230 Table 17.13 Constancia Project Global Mineral Resource Estimate Constancia Main Orebody ......231 Table 17.14 Constancia Project Global Mineral Resource Estimate San Jos Orebody..................232 Table 17.15 Constancia Project Global Mineral Resource Estimate Domain MP1...........................233 Table 17.16 Constancia Project Global Mineral Resource Estimate Domain Skarn.........................234 Table 17.17 Constancia Project Global Mineral Resource Estimate Domain Supergene.................235 Table 17.18 Constancia Project Global Mineral Reserve Estimate .....................................................236 Table 18.1 Pit Optimisation Parameters - NSR Calculation.................................................................239



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Table 18.2 Optimisation Parameters - Operating Costs and Throughput Rates..................................240 Table 18.3 Pit Optimisation Parameters - Concentrator Recoveries ...................................................241 Table 18.4 Pit Optimisation Parameters - Concentrate Grades...........................................................242 Table 18.5 Pit Design Inventories........................................................................................................247 Table 18.6 Constancia Project Global Mineral Reserve Estimate .......................................................251 Table 18.7 Constancia Project Mineral Reserve by Pit Stage .............................................................251 Table 18.8 Constancia Project Mineral Reserve by Ore Type.............................................................252 Table 18.9 Constancia Project Mineral Reserve by Operating Margin ................................................252 Table 18.10 Low Margin Mineralisation excluded from the Mineral Reserve.......................................253 Table 18.11 Annual Mining and Processing Schedule ........................................................................256 Table 18.12 Key Operating Cost Inputs...............................................................................................262 Table 18.13 Equipment Fleet and Hourly Costs ..................................................................................263 Table 18.14 Mining - Capital, Sustaining and Replacement Costs ($ M).............................................266 Table 18.15 Mine Capital Costs by Component ..................................................................................267 Table 18.16 Equipment Unit Capital Cost - Mining Fleet .....................................................................268 Table 18.17 Major Structures System in Constancia Pit Area .............................................................275 Table 18.18 Inter-ramp Slope Angles Constancia Open Pit .............................................................280 Table 18.19 Construction Materials Summary.....................................................................................283 Table 18.20 Key Hydrogeologic Issues and Mitigative Measures........................................................285 Table 18.21 Design Return Periods for Hydraulic Structures ..............................................................317 Table 18.22 Access Road Summary of Capital Costs .........................................................................320 Table 18.23 Power Supply Capital Cost Estimate ...............................................................................325 Table 18.24 Construction Fleet Requirements ....................................................................................346 Table 18.25 Disturbance Areas ...........................................................................................................365 Table 18.26 Reclamation Cost Estimate Summary .............................................................................367 Table 18.27 Capital Cost Estimate Summary ......................................................................................368 Table 18.28 Mining Capital Cost Estimate Summary ..........................................................................369 Table 18.29 Plant Capital Cost Estimate Summary.............................................................................369 Table 18.30 Process Plant Area Summary Capital Cost .....................................................................371 Table 18.31 Waste and Water Infrastructure Capital Cost Estimate Summary ...................................372 Table 18.32 Access Road Capital Cost Estimate Summary................................................................372 Table 18.33 Accommodation Camp Capital Cost Estimate Summary.................................................373 Table 18.34 HV Power Supply Capital Cost Estimate Summary .........................................................373 Table 18.35 Owners Civil Construction Fleet Capital Cost Estimate Summary ...................................374 Table 18.36 Owners Cost Estimate Summary.....................................................................................375 Table 18.37 Operating Cost Estimate Summary .................................................................................377 Table 18.38 Mining Operation Cost Estimate ......................................................................................378 Table 18.39 Process Plant Operating Cost Estimate...........................................................................379 Table 18.40 General and Administration Operating Cost Estimate Summary .....................................381 Table 18.41 General and Administration Operating Cost Estimate .....................................................383 Table 18.42 Transport and Off-site Treatment Charges ......................................................................384 Table 18.43 Off-site Operating Cost Estimate .....................................................................................384 Table 18.44 Royalty Cost Estimate Summary .....................................................................................385 Table 18.45 Prices and Charges Used in Constancia DFS .................................................................387 Table 18.46 Project After Tax Analysis................................................................................................388 Table 18.47 Production Schedule........................................................................................................389



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Table 18.48 Operating Cost Summary ................................................................................................390 Table 18.49 Key Project Metrics..........................................................................................................395 Table 18.50 Project Sensitivity Analysis (pre-tax)................................................................................396 Table 18.51 Tax and Depreciation Assumptions .................................................................................398 Table 18.52 Key Post-tax Project Metrics............................................................................................399 Table 18.53 Post Tax Project Sensitivity Analysis ...............................................................................400

List of Figures Figure 1.1 Constancia Project Location.................................................................................................19 Figure 1.2 Ultimate Pit Plan View .......................................................................................................26 Figure 1.3 Annual Ore Production by Ore Type.....................................................................................27 Figure 1.4 Mine Operating Costs over Time ($/t)...................................................................................31 Figure 1.5 Overall Site Plan...................................................................................................................32 Figure 1.6 Proposed Design Sectors, Inter-ramp and Bench Slopes ....................................................34 Figure 1.7 Constancia Process Flowsheet ............................................................................................39 Figure 1.8 Constancia Plant Layout.......................................................................................................40 Figure 1.9 Project Implementation Schedule .........................................................................................62 Figure 1.10 Pre-tax Cashflow Sensitivity Analysis (NPV 8% discount rate)........................................74 Figure 1.11 Post-tax NPV Sensitivity (8% discount rate).......................................................................77 Figure 4.1 Project Location....................................................................................................................87 Figure 4.2 Concession Boundaries........................................................................................................89 Figure 4.3 Surface Rights ......................................................................................................................94 Figure 7.1 Simplified Geology of the Andahuaylas-Yauri Area............................................................102 Figure 7.2 Geological Map of the Constancia Deposit.........................................................................103 Figure 10.1 Constancia Project Exploration Targets ........................................................................112 Figure 10.2 Pampacancha Geology Map ............................................................................................113 Figure 10.3 Pampacancha Prospect Exploratory Drilling..................................................................114 Figure 10.4 Pampacancha Prospect Main Drilling Intercepts ...........................................................115 Figure 10.5 Chilloroya South Geological Map ..................................................................................116 Figure 14.1 Cu Blanks (%)...................................................................................................................130 Figure 14.2 Mo Blanks (ppm) ..............................................................................................................130 Figure 14.3 Ag Blanks (ppm) ...............................................................................................................131 Figure 14.4 Au Blanks (ppb) ................................................................................................................131 Figure 14.5 Pb Blanks (ppb) ................................................................................................................132 Figure 14.6 Zn Blanks (%)...................................................................................................................132 Figure 14.7 Cu Standard MV700041 ...................................................................................................133 Figure 14.8 Cu Standard MV700040 ...................................................................................................134 Figure 14.9 Cu Standard MV700039 ...................................................................................................134 Figure 14.10 Cu Standard MV00038 ...................................................................................................135 Figure 14.11 Cu ICP Field Duplicate Correlation Plot..........................................................................135 Figure 14.12 High Grade Cu Field Duplicate Correlation Plot .............................................................136 Figure 14.13 Mo Field Duplicate Correlation Plot ................................................................................136 Figure 14.14 Ag Field Duplicate Correlation Plot.................................................................................137



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Figure 14.15 Zn Field Duplicate Correlation Plot .................................................................................137 Figure 14.16 CO-0501 Collar Monument.............................................................................................138 Figure 14.17 Core Recovery................................................................................................................140 Figure 14.18 Core Recovery Distribution in Mineralised Samples.......................................................140 Figure 16.1 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Supergene Ore...........150 Figure 16.2 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Hypogene Ore ............151 Figure 16.3 Drop Weight (DWi) and Bond Work (BWi) Index Test Results for Skarn Ore...................152 Figure 16.4 Concentrate Settling Tests ...............................................................................................162 Figure 16.5 Tailing Settling Tests ........................................................................................................163 Figure 16.6 Predicted Plant Production Rates Years 1-16 ..................................................................171 Figure 16.7 Predicted Average Copper Recovery and Copper Concentrate Grade ............................171 Figure 17.1 Orthographic View Looking NE, Showing the Skarn and Marble Units.............................175 Figure 17.2 Plan View Showing the Constancia Skarn Geometry .......................................................176 Figure 17.3 Sectional View Showing the San Jos and Constancia Skarn Bodies .............................177 Figure 17.4 Plan View Showing the Geological Model for the Constancia Project ..............................178 Figure 17.5 Lithological Wireframes- Plan View ..................................................................................179 Figure 17.6 Lithological Model Looking North West ............................................................................180 Figure 17.7 Sectional View 100m Wide Looking NE ...........................................................................181 Figure 17.8 Plan View Showing the Surface Extent of Supergene Enrichment ...................................182 Figure 17.9 Mineralisation Domains - Plan View .................................................................................183 Figure 17.10 Mineralisation Domains, Looking Northwest...................................................................183 Figure 17.11 Plan View Showing the 0.2% Cu Grade Shell and Drill Strings ......................................185 Figure 17.12 Orthographic View Looking NE Showing the 0.2% Cu Grade Shell and Drill Strings .....185 Figure 17.13 Plan View Showing the 1500 ppm Zn Shell ....................................................................186 Figure 17.14 Orthographic View Looking NE Showing the Relationship between Skarn Lithology

(green) and the 1500 ppm Zn Shell (light blue) ............................................................187 Figure 17.15 Plan View Showing the Relationship between the Skarn Lithology (green) and the

1500 ppm Zn Shell (light blue)......................................................................................187 Figure 17.16 Orthographic View Looking North Showing the 1500 ppm Zn Shell ...............................188 Figure 17.17 Skarn Wireframe (blue) and the Supergene Wireframe (yellow) ....................................189 Figure 17.18 Skarn Wireframe (blue) and the Supergene Wireframe (yellow), with a better View

of Overlap Areas ..........................................................................................................189 Figure 17.19 Plan View of Skarn and Supergene Wireframes.............................................................190 Figure 17.20 Supergene and Skarn, with High Zn Domains Highlighted.............................................191 Figure 17.21 Supergene and Skarn, with High Zn Domains Highlighted Plan View.........................192 Figure 17.22 SK2 in Resource Model Blocks (highlighted in red)........................................................193 Figure 17.23 Plan View of SK2 in Resource Model Blocks (highlighted in red) ...................................193 Figure 17.24 SK2 Areas - 50x50x25 m Blocks ....................................................................................194 Figure 17.25 SK2 Areas - 100x100x40 m Blocks ................................................................................195 Figure 17.26 Topographic Contours and Features ..............................................................................196 Figure 17.27 Topographic Surface Plan ..............................................................................................197 Figure 17.28 Topographic Surface Model Looking Northwest .............................................................197 Figure 17.29 Histogram of Assay Interval Length................................................................................199 Figure 17.30 Histogram of Composite Interval Length ........................................................................199 Figure 17.31 Cu Log Probability Plot Overlay of Domains...................................................................201 Figure 17.32 Mo Log Probability Plot Overlay of Domains ..................................................................202



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Figure 17.33 Ag Log Probability Plot Overlay of Domains...................................................................203 Figure 17.34 Au Log Probability Plot Overlay of Domains...................................................................204 Figure 17.35 Zn Log Probability Plot Overlay of Domains ...................................................................205 Figure 17.36 Pb Log Probability Plot Overlay of Domains...................................................................206 Figure 17.37 S Log Probability Plot Overlay of Domains.....................................................................207 Figure 17.38 Lithology Model Plan View ..........................................................................................211 Figure 17.39 Lithology Model Northing Section...................................................................................212 Figure 17.40 Mineral Zonation Model Plan..........................................................................................213 Figure 17.41 Mineral Zonation Model Northing Section.......................................................................213 Figure 17.42 Data before Unfolding.....................................................................................................217 Figure 17.43 Data in Unfolded Space..................................................................................................217 Figure 17.44 Resource Classification Schematic Level 4300 mRL .....................................................220 Figure 17.45 Resource Classification Schematic Level 4200 mRL .....................................................220 Figure 17.46 Resource Classification Schematic Level 4100 mRL .....................................................221 Figure 17.47 Resource Classification Schematic Level 4000 mRL .....................................................221 Figure 17.48 Resource Classification Schematic - Transform Section ................................................222 Figure 17.49 Cu Grade Model Validation - Section 202050 East ........................................................226 Figure 17.50 Cu Grade Model Validation - Transform Section Cu Validation......................................227 Figure 17.51 Cu Grade Model Validation - Level Plan 4225 mRL .......................................................228 Figure 17.52 Constancia Resource Reporting by Confidence Classification.......................................231 Figure 18.1 Design Sectors and Proposed Inter-ramp and Bench Slopes ..........................................245 Figure 18.2 Ultimate Pit Design Plan View ..........................................................................................247 Figure 18.3 Constancia Stage 1 Design Plan View .............................................................................248 Figure 18.4 San Jos Pit Design Plan View ........................................................................................248 Figure 18.5 Constancia Stage2 Design Plan View ..............................................................................249 Figure 18.6 Constancia Stage 3 Pit Design Plan View ........................................................................249 Figure 18.7 Constancia Stage 4 Pit Design Plan View ........................................................................250 Figure 18.8 Constancia Ultimate and Staged Pit Designs Plan View ..................................................250 Figure 18.9 Mining by Pit Stage (Mt) ...................................................................................................254 Figure 18.10 Ore Mining by Material Type (Mt) ...................................................................................254 Figure 18.11 Float Ore Processing Plant Feed by NSR Range (Mt) ...................................................257 Figure 18.12 Closing Ore Stockpile Inventories (Mt) ...........................................................................257 Figure 18.13 Haul Truck Requirements...............................................................................................261 Figure 18.14 Operating Costs by Time ($/t).........................................................................................264 Figure 18.15 Mine Operating Costs Components................................................................................265 Figure 18.16 Geotechnical Site Investigation ......................................................................................270 Figure 18.17 General Geologic Map....................................................................................................271 Figure 18.18 Pit Structural Map...........................................................................................................274 Figure 18.19 Design Sectors and Proposed Inter-ramp and Bench Slopes ........................................278 Figure 18.20 Relationship Between Inter-ramp Angle, Overall Angle, Bench Face Angle, and

Catch Bench Width.......................................................................................................279 Figure 18.21 TMF Geotechnical Investigation and Geologic Map .......................................................281 Figure 18.22 Site Layout .....................................................................................................................292 Figure 18.23 Processing Plant Layout.................................................................................................293 Figure 18.24 Constancia Project Location and Access Road..............................................................315 Figure 18.25 Typical Section of Upgraded Access road......................................................................316



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Figure 18.26 Water Management Schematic ......................................................................................327 Figure 18.27 General Water Balance Schematic.................................................................................330 Figure 18.28 PAG Waste Rock Facility Stage 5 (Ultimate) Loading Plan............................................333 Figure 18.29 Tailings Management Facility Final Configuration Plan ..................................................335 Figure 18.30 Tailings Management Facility Typical Staged Embankment Sections.........................336 Figure 18.31 Delivery Model................................................................................................................342 Figure 18.32 Project Implementation Schedule ...................................................................................347 Figure 18.33 Wind Rose......................................................................................................................354 Figure 18.34 Location of Water Quality Sampling Sites ......................................................................356 Figure 18.35 Capital Cost Estimate Probability Profile ........................................................................376 Figure 18.36 Year by Year Metallurgical Costs ...................................................................................380 Figure 18.37 Unit Process Operating Costs Per Tonne Milled ............................................................380 Figure 18.38 LME Long Term Copper Price Predictions (BH).............................................................386 Figure 18.39 Copper Spot Price, July 2008-June 2009 .......................................................................386 Figure 18.40 Ramp up Recovery Assumptions ...................................................................................391 Figure 18.41 Plant Feed Grade ..................

Constancia Technical Report Ni 43 101

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Transcript of Constancia Technical Report Ni 43 101